Crikey, he's got them by the boards

Stephen Mayne, founder and manager of crikey.com, is a shareholder activist, haunting annual general meetings of Australian companies he thinks fall short of their shareholder obligations.

He attends meetings to throw pertinent questions to the chairman and directors because it is at these meetings that shareholders can question the management and at these meetings, the chairmen and directors are obliged to answer.

Mayne also, at times, seeks election to board membership of companies he regards as especially in need of a shake-up. He has, famously, stood for election to the AMP board and is at present also aiming for Coca Cola Amatil.

He sees the old-boys' network as an invisible barrier to good corporate governance in Australia and wants it utterly demolished. The essence of good corporate conduct, both for governance and performance, he says, is transparency. You can't hide incompetence or poor practices and accounting methodologies in a company that has open and transparent reporting practices, he says.

``To be fully transparent, to fully disclose every matter, is the essence of sound company conduct,'' according to Mayne.

And this is true, he believes, whether the company is listed or private.

Mayne, of course, is not so concerned with private organisations: he has pitched himself against listed companies because he sees his task as fighting for shareholder rights and trying to create in Australia a culture of effective shareholder involvement.

Australian shareholders seem to forget that they own these companies, and that, as owners, they have every right to know how the board is running the show and whether it is doing its job properly. But most shareholders act as if the board and management is everything and they, the shareholders are just incidental.

This is not, Mayne says, entirely the fault of the shareholders. ``The rules governing shareholder meetings in Australia make it almost impossible for shareholders to exercise real power and influence.

``There are plenty of obstacles to empowering shareholders. The biggest problem is the legal requirement that, to get a resolution placed on the notice paper for a meeting, you need to get 100 signatures. Now that is very hard for any shareholder to be able, logistically, to do.

``The system in the US is better: there you merely need to hold $2000 worth of shares in a company to be able to have a resolution placed on notice for its meeting.

``Because of the Australian system, our boards effectively control the resolutions that are put up for discussion. Matters they don't want raised are not on the notice list.

``The Australian law on this matter is an ass and needs to be changed because it actually takes power and control away from the true owners of the company: the shareholders.''

This legal obstacle, he says, is compounded by an old-boys' network, which dominates company boards.

``It's a directors club and it's a closed shop.

``The AMP board, for example, can have up to 16 directors yet it has only five and, when I tried to stand for election as a director they said that there was no vacancy. The only way I can get onto that board is, therefore, to stand against one of the incumbents, and that is made almost impossible because, unless shareholders bother to attend or direct their proxy votes in a specific way, the votes will simply be counted according to the chairman's direction.

``This is a typical instance of how Australian boards take power away from shareholders.''

Mayne says the directors' club destroys more than shareholder power. The club is small; proven incompetents go on and on being elected to boards by other members of the club, and, worse still, go on being paid huge packages, even at times, exit packages to get them out of companies they have visibly failed.

These payouts, he says, come out of the pockets of shareholders, as do the falling profits of companies being run by people who are not up to the job.

``Another problem with the club is that competent directors are hugely overworked so, in the end, their skills are spread too thinly to do much good.''

Mayne believes there should be guidelines on the workloads of directors with stipulated upper limits. He also thinks Australians put up with much too much shoddiness and need to learn how to use their clout against errant boards. ``Australians don't `sin-bin' directors who perform badly.''

They just grizzle and accept it. Justin Gardiner, for instance, was chairman of the HIH audit committee. ``Have we blackbanned him? No, he's up for re-election for both the Austar and Hutchison boards as chief independent director. He was from Arthur Anderson – the HIH auditors – who are also the auditors for Austar and Hutchison.

``So, these problems just keep on recurring.''

Mayne believes there is a desperate need for true independence on company boards: too often the directors are connected to each other either personally or by business cross-involvements

``We also need a separation of church and state between investors and the companies they invest in.

``Too often in Australia, we have fund managers – which invest in a company – acting as directors on that company's board.

``In the BHP Billiton merger, Colonial was one of the biggest shareholders and its chairman wanted the merger. We need a law that bans a fund manager from sitting on the board of any company it invests in.

``We need to make a complete split between the debt side and the equity side of Australian business.

``I also think we need a law that insists on complete disclosure by fund managers of the way they vote at any company meeting. Institutions hold about 60 per cent of Australian shares and each share has a voting right. How these votes are placed should be disclosed.''

Many of those votes are held by superannuation funds, even by union super funds. Shareholders have a right to know whether their union funds are voting in a way that the union and its members would support.

The two greatest needs Australian companies have, he says, is transparency and true independence of directors.

Until the law imposes these things, Mayne will keep fighting.

Copyright © 2022 The Mayne Report. All rights reserved

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